28 January 2016

It has been an interesting week in the mortgage market with
many rate changes and new product launches.

Some of the more noticeable include the launch of products,
from our friends at Precise Mortgages, designed to assist those looking to
purchase investment properties (Buy to Lets) in a Limited Company name. With
the forthcoming removal of tax relief, from April 2017, landlords will only be
able to offset mortgage interest at the basic rate of tax at 20%. This will affect higher rate tax payers, but
also basic rate tax payers if they are pushed in to the higher rate bracket,
perhaps as a result of their rental income.
As a result, we are seeing more and more customers look at a Ltd Company
Special Purpose Vehicles to hold their investment properties and provide more efficient tax benefits under current
legislation. Obviously, tax advice
should be sought as individual circumstances vary!

Sticking within this area, AXIS Bank, a relatively new lender, have lowered
their rates by as much as 0.30% for their Ltd Company mortgage offerings. We
are seeing more and more lenders launch into this arena and price their
products very competitively.

More mainstream lenders, such as Santander, Shawbrook Bank, Coventry Building
Society and Barclays have reduced a selection of their Buy to Let rates and
some of their Residential rates by up to 0.5%.

Conversely, with lenders reducing rates and volumes for the
New Year on the increase, we are seeing more people being declined. Not necessarily due to adverse credit, but
because their credit score is not as high as they thought, and they don't meet
the lenders requirements as a result.

Credit scoring is one of the most widely used means to
assess a customers ability to obtain a mortgage. All credit scores include a credit search –
this reviews your financial history, payments to utility suppliers, mobile
phones, etc. Almost every financial institution from mobile phone companies to
insurance companies will carry out a credit search before offering you their
services. This can also be a negative though, as the more credit searches you
have, the lower your credit score may be.

The high street lenders, in the main, use credit
scoring. However, do your homework as
many smaller lenders will offer just as attractive rates, but they will
manually assess your ability to obtain a mortgage and use a human to assess
your credit profile, rather than a computer aided credit score decision making
system.

21 January 2016

With the new stamp duty changes only just around the corner,
I though it prudent to look at some of the areas that are currently affecting
the Buy to Let sector.

In the main, and with First Time Buyers struggling to get on
to the property ladder, a Buy to Let or investment property is a good way to
gain both a monthly income as well as capital growth over the longer term.

But the mortgages assigned to these types of properties tend
to be provided by different lenders from the normal residential lenders and not
normally household names.

They are also calculated differently. So a residential
mortgage will use your income and expenditure to work out what loan you can
afford and the lender available to you. Whereas with a Buy to Let
mortgage, the lender will rely on a valuer confirming what the value of the
property is and also what the monthly rentable value the property may achieve.

Most high street Buy to Let lenders will look at a rental
amount achievable of 125% of the monthly mortgage payment at a nominal rate,
usually of 5%. So if a rent of £1,000 a month was paid, this would
generate a loan of £192,000. If the rent was £1,250 a month, a loan of
£240,000 is possible. But what we have seen recently is that lenders are
increasing the calculation rate of 5% to 5.5%. This would mean that for
the two examples above, £1,000 rent now only achieves £174,545 and £1,250 per
month equates to £218,181. These make a big difference. Thankfully,
there are still a number of specialist lenders, accessed through a limited
number of brokers, who offer much more accommodating calculations, with some as
low as 3.5%. However, I suspect as volumes increase with these lenders
that they also will have to increase their calculations to stem business
volumes. Time will tell.

Finally, let's recap on the stamp duty changes:

From April, for Second Properties, or Buy to Let purchases, stamp duty
rates will be 3% higher. This means that we have the following:

14 January 2016

Halifax
have recently carried out a survey and found that many customers are now
choosing a longer term in which to repay their mortgage. Some lenders now offer up to a 40 year
term. Of the First Time Buyers that were
surveyed by the lender, 26% took a 35 year term. Taking a longer term allows the monthly
payments to be lower as the costs are spread over a longer period. However, this also means that interest on the
mortgage will be payable for longer.

From one end of the scale, to the other! Over 65’s were given a boost this week as the
Dudley Building Society has scrapped their maximum age limit entirely. Older borrowers have struggled for sometime
when it comes to mortgages in to retirement or later life. With no limits, and human underwriting, rather
than a computer decision, this will allow people to apply for mortgages when
they don't conform to 'normal' retirement ages.
With most of the high street lenders wanting mortgages repaid by age 65
to 70 in the main, it's good to have lenders who will cater for those who may not want to be released from their
mortgage as yet, especially if they are continuing to work on or their pension
and investment income is at the right level.

The year has started with something of a bang in the
mortgage arena and we are already seeing lenders vying for business with new
rates, terms, conditions and criteria changes designed to attract new
customers. The later life mortgages
being just one such innovation! Others
include new Buy to Let products for both private and Limited Company purchases
or re-mortgages. One lender will now do a 100% mortgage on a residential
property as long as the applicants can manage the full payments themselves and
that 20% of the mortgage can be charged against the equity of a parental property.
This product has rates in the mid 3% range too.

Whatever your circumstances, it is possible that there is a
suitable lender and product opportunity for you. Maxims will always include ability to pay,
credit history, deposit available, type of property and term required and the
lenders overall assessment of affordability.

07 January 2016

Happy New Year! I
hope it is a successful and enjoyable one for you all.

Over the Christmas period, we have seen a number of rates
drop as lenders seek to attract new business. One example is from the nice
people at Virgin Money who have reduced rates on their first time buyer
products to under 4.30% for a two year fixed rate. This is aimed at those with just a 5% deposit
and includes a £1,500 cash back to help pay the stamp duty costs on a property
up to a value of £200k. Positive
thinking. Let's hope others follow suit.

I do think we will see some fierce lender competition in the
opening quarter of the year. Lenders are
preparing for new regulations that will hit the market in late March, and with
only a small amount of stock currently available to purchase, the remortgage
market especially will be singled out as a quick source of business.

Sadly, with January often proving the biggest month of the
year for divorces, re-mortgaging can be a key part of the separation
process. It is a difficult time for all
parties, especially when children are involved, but the need to pay the joint
mortgage is imperative. If the payments
are not made, you may find it difficult, if not impossible, to obtain a
mortgage in sole names. For the newly
single, many lenders will take in to account child maintenance, working tax
credits and so on. Affordability is key
and any lender will base their decision to lend around this.

The bank of Mum and Dad, or even Grandma and Grandad, can
also be bought in to consideration.
There are various ways in which the older generation are helping their
children. Some are gifting deposits, to help them get onto the
property ladder. With most products, the larger the deposit, the
lower the interest rate. Others have agreed to the placement of a
collateral charge on the parents or grandparents property. This
gives a lender more security and maybe a better credit risk rational to the
deal, than originally might have been the case.

Whichever way, always explore the options and have a
conversation with a professional as there may just be an alternative way to do
the deal.